Generative AI (GAI) has disrupted numerous industries, and the healthcare industry is eager to join in and explore the applications of GAI in healthcare research. However, the healthcare sector must be cautious due to the potential risks. Read on to learn more about Generative AI in healthcare, including adoption, usage, and risks.
Generative AI, an advanced technology that employs deep learning models, can create images, videos, text, codes, simulations, and other high-quality content by responding to given prompts within seconds.
While GAI has been shaking up almost every industry with its easy-to-use interface and instant responses, the healthcare sector is typically slower to adopt new technology, and the risks of inappropriately deploying the technology are huge.
Nevertheless, technology giants and healthcare startups are racing to test the potential for large language models (LLMs) and GAI tools in healthcare research. Understanding the adoption, usage, and potential risks of GAI in the healthcare setting is crucial.
With its vast applications, it is important to carefully select the use cases that can positively impact patients with minimal regulatory, compliance, cost, and health risks. Let’s explore this further.
By using the below framework, healthcare organizations can prioritize use cases for observation, exploration, and future investment:
Based on our analysis, GAI offers the greatest immediate potential in the area of clinical documentation. The technology can be used to free scarce clinical resources from time-consuming administrative tasks, allowing them to instead focus on delivering quality care to patients. For example, simplifying clinical documents and creating easy-to-review clinical patient summaries are some areas where GAI can have the greatest short-term impact in healthcare.
Looking beyond these basic applications, healthcare stakeholders need to cautiously consider using GAI for diagnosing patients or directly providing medical care. The technology’s tendency to sometimes invent a response when it lacks sufficient information makes it too risky for care delivery. Significant long-term investments will be needed before GAI can be used for delivering patient care.
Will Generative AI in healthcare lead to job loss?
GAI is expected to considerably alleviate the administrative burden of healthcare professionals. The nature of jobs will shift and healthcare professionals will have to adapt as demand grows for GAI. Certain healthcare professions such as medical transcriptionists, medical record keepers, medical coders, call center executives, and home healthcare executives will need to upskill as GAI automates some manual processes.
The other big question in everyone’s mind is whether GAI will completely replace physicians. This is unlikely to happen anytime soon. GAI should be viewed as a tool to augment healthcare professionals’ capabilities and not replace them entirely. Physicians, surgeons, radiologists, and nutritionists will leverage GAI to enhance care delivery.
Challenges to future adoption
Generative AI in healthcare is a disruptive opportunity that both excites and concerns healthcare professionals. While it offers significant potential, the industry needs to overcome obstacles to commercial adoption.
Some of the risks include:
Ethical concerns and biases – Healthcare professionals must be wary of the ethical concerns and limitations related to using sensitive member/patient information. Moreover, limitations of datasets also can lead to biases in results or outcomes suggested by GAI
Training data limitations – Generative AI models require high-quality training data to improve the accuracy of output, which can be difficult to source. The model’s efficiency also depends on the breadth of training data, which can be both time-consuming and expensive to label
Integration issues – Integrating GAI into existing healthcare systems and workflows can be challenging, especially with legacy systems that are not designed to work with AI
High costs – The technology costs of building and deploying GAI models can be expensive
Adopting Generative AI in healthcare can be a game changer. While it offers many potential benefits, the industry needs to fully understand the associated risks of GAI before implementing use cases and adopting the technology at scale.
To combat a looming recession, healthcare providers will need to take strategic action, including cutting costs, investing in patient experience, embracing digital technologies, and strengthening outsourcing partnerships. Read on to learn about the healthcare provider trends coming and how service partners can help hospitals and health systems overcome the challenges in an economic downturn.
Reach out to learn more on this topic or ask questions.
As we covered in our last blog, healthcare payers, particularly commercially-focused enterprises, have to brace for the impending economic downturn. The need to survive becomes even more essential for healthcare providers that are already bleeding under financial challenges.
The first half of the fiscal year 2022 was one of the most challenging times for hospitals in the US as they faced months of high-magnitude negative operating margins (Fig. 1). Although the margins stabilized slightly later, 2023 started on a rough note again owing to labor shortages, rising supply chain costs, and lower patient volumes – eventually leading to a further drop in hospital margins. To add to their challenges, the prospect of an impending recession is likely to exacerbate the situation.
As concerns of an impending recession take hold, patients may begin to reassess planned medical expenses in relation to other household costs, particularly when budgets become tighter. This can be particularly challenging for hospitals, especially given the aggressive cost-sharing measures associated with high-deductible health plans (HDHPs), which can pose additional obstacles to their financial recovery.
Recently, 4 in 10 Americans were compelled to delay or skip healthcare treatments, trim regular household expenses, or borrow money due to rising healthcare costs. These pressures will lead hospitals to carefully re-strategize their investments. Let’s deep-dive into some of the changes that hospitals and health systems can expect in a recessionary year.
What healthcare provider trends can we expect in a recession?
Moderate drop in specialized resources demand: An extreme shortage of clinical resources last year led hospitals to depend heavily on expensive contract nurses, extended overtime hours, and more clinical errors, eventually resulting in worse patient outcomes.
While the demand for clinical resources is expected to continue to keep provider leaders up at night, a full-fledged recession might ease the shortage a bit. Several healthcare institutions reported a rise in nurses in the last recession because some retired nurses started working again or postponed retirement.
However, this is not expected to eradicate the labor problem in the long term as the “experience-complexity gap” will only worsen with an increasingly aging population having complex and chronic care needs
Squeezed cost pressure: Hospitals will continue to see cost pressures hitting their margins because of increased baseline labor rates and supply chain costs. The pandemic and ongoing geopolitical issues elevated the supply chain disruption leading to costlier negotiations for specialized medical products. As a result, medical supply prices were up a whopping 46% at the end of 2021, compared to 2019.
Furthermore, it is important to note that healthcare provider businesses face a considerable amount of exposure to labor costs. This is especially true for more labor-intensive provider businesses like home health, personal care services, and hospice, where labor can account for more than 50% of costs.
Unfortunately, while costs continue to rise, reimbursement rates tend to only increase modestly because pricing negotiations with payers take place over multiple years, and government entities adjust pricing annually. While providers may seek to re-negotiate with health plans midway, pricing corrections may not be substantial enough to adequately prepare for the financial frugality that patients may begin to exhibit
Reduced demand for non-urgent/elective care: An impact on household budgets tends to make patients rethink planned surgeries and, in some cases, delay the avoidable, non-threatening ones as well. A survey conducted during the Great Recession found that families with limited financial means prioritized spending on essential non-medical items and decreased their healthcare utilization.
The survey also revealed several concerning trends in healthcare, including patient anxiety due to the inability to pay medical bills, a rise in missed appointments, an increase in significant stress symptoms, and new illnesses and health problems resulting from a lack of preventive care.
Moreover, with reduced patient volumes, healthcare providers may face increased competition for patients, particularly in the outpatient settings, leading to lower prices and diminished profitability. The competition can be further intensified with the entry of players like Walmart and Amazon expanding their retail clinic presence
Greater revenue dip: A recession leads to an increase in uninsured patients which negatively affects hospitals’ revenue streams. During the Great Recession, hospitals suffered a huge rise in bad debt and uncompensated care.
This impact can be more prominent for hospitals with higher exposure to commercial plans. According to the American Hospital Association, the hospital reimbursement rate by private payers increased from 116 percent of hospital costs in 2000 to 128 percent eight years later.
This rate has continued to climb, with hospital systems now charging commercial insurers an average of 208 percent of their costs or even more, findings from a 2019 Rand report that analyzed claims data from private employers in 25 states show.
If unemployment leads to a shift from privately-insured plans to Medicaid, hospitals could lose revenue. While cutting costs to save margins is an option, this might have a spiraling effect as resource and bed shortages would further impact revenues.
These healthcare provider trends will compel suppliers to take a streamlined and targeted approach to survive a recession. Here are some of these strategies:
Four strategies for healthcare providers to combat a recession
Identify cost-saving opportunities: Healthcare providers will have to conduct robust audits to identify cost-saving opportunities across the front-end, mid-, and back-end revenue cycle processes.
By identifying areas where costs can be cut without impacting patient care, providers can take concrete steps to reduce expenses and operate more efficiently. Providers with in-house revenue cycle management (RCM) operations can consider outsourcing as well as offshoring to benefit from cost arbitrage by identifying the right process, delivery, and partnership for outsourcing. In fact, outsourcing medical coding staff alone can save hospitals 25-30% on administrative costs.
Healthcare providers that have partially outsourced operations can consider expanding sourcing partnerships to other segments after a comprehensive assessment. Several health providers, such as Northern Light Health and Owensboro Health, have accelerated their RCM outsourcing plans in collaboration with service providers
Double down on patient experience: With competition intensifying during a recession, healthcare providers can differentiate themselves by investing in initiatives that improve patient satisfaction and loyalty. Providers need strong customer experience (CX) capabilities and to deliver informed and robust patient communication addressing a range of administrative and clinical issues.
Providers should strategically focus on improving awareness of overlapping needs for better relationship management, segmentation, marketing, analytics, product innovation, and engagement. The CX program should be built on fundamentals of personalization, particularly for complex care needs, as every patient has their own needs and preferences.
Healthcare providers should be open to feedback and actively seek to improve the patient experience by conducting patient surveys, analyzing data to identify improvement areas, and implementing changes based on patient response
Embrace digital: Providers will have to invest in future-proofed digital tools, solutions, and innovative portals that not only improve the front-end patient experience but also eradicate redundancies in the back office.
These solutions can span from point-based, pre-configurable solutions to E2E cloud-based artificial intelligence (AI)-enabled platforms coupled with automation and analytics capable of consuming vast amounts of information from data lakes.
A testament to this opportunity can be seen in Norman Regional Health System’s investment in VisiQuate’s AI-powered Denials Management Analytics and Revenue Management Analytics to power RCM operations using analytics.
On the clinical side, providers will have to invest in solutions that provide a comprehensive look into patients’ care journeys through proactive insights. Areas like remote monitoring and population health analytics should no longer be considered the care of the future and must be leveraged now to improve care coordination. Some of these efforts can be channelized in collaboration with health plans to ensure that care gaps are closed in time
Strengthen sourcing partnerships: Healthcare providers should comprehensively review current sourcing partnerships by taking an outcome-focused approach, adopting the right technological solutions, and creating a dynamic communication channel to manage operations and prioritize escalations.
By clearly defining performance metrics and incorporating a robust governance mechanism, healthcare providers can get the right benefits and meet the anticipated objectives.
What does this mean for service providers?
Service providers in the RCM operations space will have to adopt a unique and differentiated go-to-market strategy to solve these healthcare challenges by taking into account individual as well as market-specific issues.
This can be achieved by having a strong resource base with specialized skills and expertise, such as nursing, coupled with the scale that can support providers based on fluctuating demands.
Moreover, service providers also will have to leverage digital partnerships while simultaneously building their core competencies. By taking these steps, service providers can help hospitals and healthcare organizations weather the coming storm.
Artificial Intelligence (AI), technology integration, and consumerization are among the key trends driving the future of healthcare, a glimpse into the horizon at HIMSS23 showed. Read on to learn takeaways from Everest Group analysts who attended the recent global healthcare conference.
More than 35,000 healthcare leaders converged in Chicago last week to share ideas, highlight investments, showcase demos, and shape the future at HIMSS23. Technology integration, value realization, and risk avoidance dominated conversations at this year’s more strategic and connected conference focused on finding solutions to urgent issues.
Here are the three main themes we saw at HIMSS23:
Integration is the key to realizing value
Integration was a major topic, as many organizations struggle to stitch together various composable platforms. While microservices have enabled precision and faster outcomes for specific use cases, these independent solutions often do not communicate with each other, which can hinder value realization. Many stakeholders we interacted with highlighted the desire to explore ways to better integrate these platforms.
Generative AI is attracting attention
Generative AI, like ChatGPT, and its potential applications is creating a lot of excitement. Major technology companies such as Microsoft and Google are leading the way in developing innovative uses for AI in healthcare, including creating new health applications. While some early examples of AI in healthcare show promise, such as voice dictation that help doctors document patient information more efficiently, how AI will address broader healthcare challenges such as staffing shortages, physician burnout, and rising costs remain to be seen.
Consumerization of healthcare will continue to grow
Putting the patient at the center of healthcare was another recurring theme, with a focus on designing healthcare systems and technologies that are intuitive and seamless for users. The increased emphasis on user experience has been influenced by the consumer world, where these types of technologies are the norm. The coming years are likely to bring a greater focus on patient portals, wearable health solutions, and virtual care delivery technologies to improve patient/member experience.
How was HIMSS different this year?
The annual HIMSS conference returned to Chicago, with attendees noting a greater sense of urgency and action in meetings versus prior events in Orlando and Las Vegas. A large number of healthcare information and technology companies attending were focused on emerging enterprise priorities around value-based care (VBC) and interoperability.
Leaders engaged in meatier discussions focused on integration, value realization, and risk avoidance. The conversations showed that healthcare enterprises are looking for solutions to get more out of their technology, budgets, and resources in today’s challenging environment.
The large post-pandemic turnout demonstrated the appetite for in-person interaction. Event organizers focused on creating more focused opportunities for attendees to gather and have relaxed and candid conversations with friends, colleagues, and clients, which have been difficult to replicate virtually.
Overall, interacting with industry leaders influencing the next stage in healthcare technology at HIMSS23 was an illuminating experience for Everest Group analysts Abhishek Singh and Manu Aggarwal, who are available to share their insights.
A looming global recession may finally take its toll on payers who have escaped prior economic challenges. Let’s take a look at the healthcare trends influencing decision-making by payers, the markets most likely to be affected, and the actions payers can take with the uncertain outlook.
Wall Street predicts that the probability of a global recession in 2023 is 61%, well above the stable benchmarks. Although inflation has eased up marginally since the last quarter, tighter financial conditions and weaker global growth still indicate a potential downturn.
The healthcare industry historically has weathered economic collapses better than core industries that are generally more severely impacted. A Forbes assessment shows that while the US economy (as measured by GDP growth) plunged into recession eight times over a 60-year period from 1960-2020, healthcare expenditure growth never shrunk, often outgrowing gross domestic product (GDP) as illustrated in Exhibit 1.
This stability is primarily because impacted employees either opt for subsidized government programs or forego medical care, as applicable, pushing the healthcare cost to the future. As a result, health plans tend to be relatively less affected due to recessionary headwinds. In fact, reports suggest that earnings for healthcare payers declined only by 27% compared to a 77% decrease for the overall S&P 500.
Although many healthcare payers posted strong growth rates at the end of fiscal year 2022 as shown below (Exhibit 2), the results may not be as positive in 2023, particularly for employer-sponsored or provider-owned health plans.
The overall impact on the payers in the fiscal year 2023, however, will be determined by several upcoming trends. Let’s look at some of these influencing factors in detail below.
Medicaid redetermination: As states kickstart Medicaid redetermination in April 2023, over 15 million Medicaid members are expected to lose their enrollment after the renewal process. Several payers, such as Centene, expect to lose about 2.2 million members over the next 18 months. On the other hand, payers like Humana and Molina Healthcare project their Medicaid membership to be largely stable due to new Medicaid contracts offsetting redetermination losses
Prior authorization rule: The CMS Interoperability and Prior Authorization rule requires regulated payers (Medicaid, Medicare, CHIP, and QHP) to utilize Application Programming Interfaces (APIs) that give healthcare providers more streamlined access to data. Payers will be required to maintain these APIs using the Fast Healthcare Interoperability Resources (FHIR) standard. This regulation is expected to bring effective workforce utilization, improved data exchange, reduced appeals, and, in turn, more timely claims disbursal
Inflation reduction act: Starting this year, Medicare will be allowed to negotiate prices for prescription drugs with pharmaceutical companies. Apprehensions are high that this will lead to cost-shifting to privately funded and employer-sponsored health plans. Or, the reverse also could be true, and privately-funded plans may demand similar negotiations along the lines of Medicare to avoid overpaying for healthcare. Moreover, the Part D plans will have to bear higher responsibility in the catastrophic phase as the law puts a spending and inflationary cap on out-of-pocket expenditure beginning in 2025
Focus on alternative care market: Payers are striving to strengthen preventative care and ensure end-to-end offerings, as many big players (e.g., United HealthCare, CVS Health) have invested in home, virtual, and alternative care. The race to outcomes-based care is shifting from retrospective to proactive and comprehensive health management through multiple integrations
Member experience and STAR Ratings: With the Consumer Assessment of Healthcare Providers & Systems (CAHPS) member experience weights increasing to four times in 2023, ensuring top-of-the-class member experience will remain a priority for health plans
Impact of the potential downturn on the healthcare payer market
So, how specifically will payers be impacted? It’s hard to say, given the global inflation outlook improvement. But lessons from the past indicate that a sustained period of economic uncertainty will impact both the government and the private markets in the following key markets:
Privately-funded market: Markets such as employer-sponsored health plans could lose members due to layoffs and loss of employee-sponsored coverage. Payers such as Cigna, that have significantly high commercial membership (Exhibit 4), could feel the heat of the competition from the health insurance exchange (HIX) and Medicaid plans. However, these losses can be offset if payers can retain these members in other product lines. Alternatively, having a diversified business portfolio such as a pharmacy or data services also may provide a cushion against medical membership loss
Government market: While the Medicaid market would traditionally gain membership in a recession, instead it will see the combined effect of redetermination and a potential economic downturn. As some of the members who lose employer coverage join Medicaid, the drop in membership might be less than expected after the redetermination process. The impact on Medicare, however, is expected to be relatively insignificant. Overall, the payer mix might experience a shift toward government business
Lastly, the uninsured population may experience an uptick due to information asymmetry and administrative complexities. According to an assessment done from 2007-09, only some of the insurance loss from a lack of employer coverage was offset by added public coverage, leading to a 5.6 million rise in uninsured adults. While the Affordable Care Act (ACA) has lowered the uninsured population, an economic downturn potentially can add to the current uninsured coverage.
What should payers do in this uncertain market outlook?
With the market unpredictability, healthcare payers will have to take calculated measures to prevent business impact. Here are four actions they can take:
Focus on operational efficiencies: Healthcare providers are more likely to be impacted by a downturn, pushing them to negotiate for higher contract prices. Payers will have to explore ways to offset any price hikes. This can lead to increased outsourcing and offshoring of traditional processes, such as provider and claims management to ensure lower administrative spending and higher operational efficiencies
Invest in preventative care: Price-conscious members may move to higher deductible plans and avoid care, particularly preventive services, leading to lower utilization. This can have lingering long-term effects, particularly for members with multiple chronic diseases. To combat this, payers should identify susceptible members, invest in areas such as social determinants of health (SDoH), and devise strategies that prevent care gaps and discontinuity
Increase digital member engagement efforts: Millions of members lost their coverage in the last recession despite being eligible for other plan options, partly due to a failure in getting the right information and comprehensive engagement with their insurers. To avoid this from happening again, payers will have to ramp up investments in member engagement to avoid losing members. Regional health plans and the Blues will have to bring in digital-enabled solutions that help to understand member needs and provide forward-planning insights. Support from third-party services providers who offer customized, plug-and-play customer experience (CX) solutions can help meet this need
Upgrade systems: Several payers with strong capital support can undertake digital transformation efforts to replace legacy systems and move to interoperable, connected ecosystems that will help improve administrative as well as care outcomes. However, this might only be applicable for payers who experience limited utilization and payouts due to the downturn.
Outlook for service providers
These measures will require service providers to proactively engage with healthcare payers and focus on three levers – the right clients, the right capabilities, and the right value addition. This will enable service providers to aim for the right opportunities such as member engagement and preventive care and ensure sustainable growth in an uncertain economic environment. Finally, in a highly competitive market like payer services, service providers will have to offer targeted digital and traditional Business Process Outsourcing (BPO) services to serve the right client need and differentiate themselves with unique value propositions refined as per the prevailing market demand.
Improved supply chain visibility can help global pharmaceutical and medical device suppliers overcome the many logistics challenges they face post-pandemic. Internet of things (IoT) and blockchain technologies offer promise to address the growing demand for product traceability and transparency. Read our second blog in this series to learn more.
The COVID-19 pandemic exposed major supply chain weaknesses in the life sciences industry as the industry experienced skyrocketing demand for innovative medical products.
Enterprises struggled to keep operations running amid the pandemic without adequate supply chain product visibility or unified systems to provide needed data to improve logistics performance.
Most companies lack the analytical tools to completely integrate and analyze data from various systems at all levels – from the plant’s local work centers to the world’s end-to-end supply chain.
As a result, the massive data generated during the pandemic provided little usable information and insights.
Supply chain visibility: right time for real time?
Supply chain visibility can help enterprises overcome these challenges and build more robust and effective supply chains by tracking medical products in transit and providing a clear view of the inventory and activity.
Let’s look at the factors that are driving enterprises to invest in supply chain visibility.
Product loss and recall: Theft is costly to the industry and needs to be stopped. The pharmaceutical industry experienced its largest theft in 2020 when $1.2 million worth of oncology drugs were stolen from a cold storage warehouse. In the second largest theft that year, $600,000 in pharmaceuticals were taken from a distributor.
The industry also is being hit by losses due to expired, non-compliant, or recalled products that have problems with temperature parameters or other issues. According to the U.S. Food and Drug Administration (FDA), 281 drugs and 50 medical devices were recalled during the two years of the pandemic
Counterfeit products: Increasing numbers of fake drugs and medical devices have found their way into customers’ medicine cabinets. Counterfeit drugs are valued at an estimated US$200 billion annually. Since the World Health Organization (WHO) established a global surveillance and monitoring system in 2013, it has received 1,500 reports of substandard or falsified products. Of these, antimalarials and antibiotics are the most reported. Geographically, 42% come from the African region and 21% each from the Americas and Europe.
Local regulatory frameworks are being implemented to provide more product visibility. For example, the Indian government has mandated life sciences enterprises include Quick Response (QR) codes on Active Pharmaceutical Ingredients (APIs), effective January 2023
Regulatory frameworks: The Drug Supply Chain Security Act (DSCSA), amended by the FDA in 2013, mandates enterprises to create an electronic system to track and trace certain prescription drugs. Manufacturers and trading partners are required to encode their products with unique identifiers on the individual packages and track products at the unit level by November 2023.
A recent analysis found the top 15 global pharmaceutical companies emit 55% more greenhouse gas emissions per million dollars of revenue than the automotive sector. Medical waste has also become a significant issue, particularly with the spread of single-use personal protective equipment and testing kits. As a result, life sciences enterprises are taking initiatives to build more transparent supply chains to track and trace carbon emissions, medical device decommissioning, and secondary package waste
Everest Group’s view of end-to-end supply chain visibility solutions
Let’s explore more on the supply chain visibility framework:
Make/Manufacture – Inbound logistics that includes procuring raw materials, drug packaging, and moving finished goods to the supply chain
Use Cases: Addressing drug serialization and aggregation, strategic sourcing, fleet tracking, drug e-labelling, artwork management, and API tracking
Deliver – Outbound logistics that include order confirmation, shipping, last-mile delivery, and customer service
Use Cases: Addressing drug expiry monitoring, network management, demand forecasting, and warehouse management
Stakeholders experience – Unifies vendors, suppliers, distributors, pharmacies, patients, and others in the life sciences supply chain with one platform
Use Cases: Asset tracking, anomaly detection, and condition monitoring alerts
Returns management: Communicating with end-customers, stakeholders, and life sciences enterprises to obtain and restock goods. Having visibility of goods in reverse logistics helps enterprises make calls on whether to discard, repurpose or recycle drugs and medical devices
Use cases: Case and compliance management, returns tracking and scheduling, conditional monitoring alerts, and drug serialization
Service provider landscape
IT service providers are increasingly offering solutions to address these needs as these instances gain traction. One example is HCL’s serialization and authorization solution that helps track product returns in real time.
Recognizing the need for greater insights into supply chain performance, enterprises have invested in Enterprise Resource Planning (ERP), Laboratory Information Systems (LIMS), Electronic Batch Records (EBR), Manufacturing Equipment Systems (MES), Quality Management Systems (QMS), and other IT systems to capture transactional and performance data.
Information sharing, data interoperability, security, and trust are the major hurdles for life sciences enterprises to implement supply chain visibility solutions. Blockchain and the Internet of Things (IoT) offer promising prospects to tackle these challenges by maintaining the continuity of information, realizing the link between physical and information flow, and providing fraud detection alerts.
IBM, KPMG, Merck, and Walmart successfully completed an FDA pilot program in 2020 that found blockchain technology can be used to meet the DSCSA requirements to track and trace prescription drugs and vaccines distributed in the U.S.
We recommend life sciences enterprises partner with IT service providers that have point solutions for supply chain visibility or engage with niche platform providers to build end-to-end supply chain visibility solutions.
Supply chain visibility, strategic sourcing, cold chain requirements, sustainability demands, and personalized medicine are creating opportunities in the life sciences supply chain for IT partners delivering digital solutions. Read this first part of our blog series to understand the shift that is underway.
New security requirements, industry mandates, and changing customer needs require the contemporary life sciences supply chain to become more efficient, transforming the logistics network.
The worldwide value of pharmaceutical goods traded has grown six-fold in the past two decades from US$113 billion in 2000 to US$629 billion in 2019, according to the United Nations Comtrade Database.
This growth has driven more companies to outsource production to Contract Manufacturing Organizations (CMOs) to meet the pent-up demand. Let’s explore the factors impacting these increasingly global and complex chains.
Pandemic-driven supply-demand fluctuations: Rising consumerism and pandemic-driven proliferation of precision medicines, wearables, and telehealth applications have left enterprises struggle to meet increased demand. One example of this is Bristol Myers Squibb’s struggling to meet the strong demand of BCMA-targeted CAR-T cell therapy Abecma
Ever-changing regulatory oversight: Many industry-wide regulations have been implemented to strengthen the safety and effectiveness of medical devices and drugs commercialized across the globe. These include the European Union Falsified Medicines Directives (EU FMD) in 2011, Drug Supply Chain Security Act (DSCSA) in 2013, European Union Medical Device Regulation (EU MDR) in 2017, and the UK Medicine and Medical Devices Act (MMD) in 2021
Need to reduce product diversion and recall: Increasing numbers of black-market activities and illegal drugs are finding their way into the supply chain and affecting companies’ brand values. The most common drug diversions are class benzodiazepines, opioids, stimulants, antipsychotics, anesthetic drugs, and GABA agonists
Supply chain data sharing and data security: Broad threats, ranging from cybersecurity to data breaches, have led to unplanned financial and intellectual property losses. A case in point: IBM detected cyberattacks against the cold chain drugs specifically associated with GAVI, the vaccine alliance, and government agencies involved in the drugs’ distribution
Five key investment areas in the life sciences supply chain
Supply chain visibility: Implementing visibility platforms could have saved 1 billion vaccines during the pandemic, according to the United Nations Environment Programme. This creates opportunities for IT service providers to partner with enterprises to enable end-to-end supply chain track and trace models.
Additionally, the Drug Supply Chain Security Act (DSCSA) outlines requirements to achieve interoperable, electronic product tracing at the package level to identify prescription drugs distributed in the United States by November 2023. Similar laws are in effect in Europe and other parts of the world. (For more on supply chain visibility, see our next blog.)
Strategic sourcing: With the growing awareness post-pandemic of the supply chain risk of overdependence on raw material procurement from India and China, enterprises are starting to reshore pharmaceutical manufacturing in the US and Europe.
Also, since sourcing and procurement account for roughly half of drug development and manufacturing costs, firms are focusing on optimizing spending by using technology to gain real-time spending views, structure budget accountabilities, and align purchasing with production
Emerging cold chain requirements: Various factors have pushed enterprises to increase their focus on temperature-sensitive drugs that contain high-value active ingredients and have shorter shelf lives. Cold chain adoption also has been accelerated by the rapid growth of consolidated distribution houses and online retailers’ improved last-mile connectivity
Sustainable secondary packaging, carbon footprint tracking, responsible raw materials procurement, effective medical device decommissioning, and scrap minimization are gaining more traction in the life sciences industry. Additionally, the European Union directive 94/62/EC, in conjunction with directive 2018/852, demands a significant reduction in packaging waste by 2025
Supply chain tailored to personalized medicine: Specialized logistics partners are needed to handle the extremely delicate and patient-specific components of innovative and personalized medications – from collecting cells/genes from healthy donors to delivering innovative medicine to patients.
Life sciences enterprises have invested approximately US$ 13 billion in cell and gene technologies since 2018. More than 900 enterprises worldwide are developing cutting-edge advanced therapeutics, and approximately 1,000 advanced therapy clinical trials are underway. This changing landscape requires supply chains that provide temperature-sensitive environments, closed loops, Chains of Identity (COI), and Chains of Custody (COC)
Implications for service providers
In response to these factors, next-generation connected supply chain ecosystems are beginning to emerge. Life sciences enterprises will need the right complementary digital technologies to optimize costs, drive productivity through streamlined route selection, and improve the customer experience.
This will create new opportunities for IT service providers that bring niche talent and a balanced portfolio of engineering and digital services, as well as supply chain-specific platform providers who will become partners of choice for life sciences enterprises.
Health systems are increasingly seeking competitive proposals post-pandemic to outsource Revenue Cycle Management (RCM) and get the best prices and innovation in contracts. Learn what enterprises want and how providers can win these RFPs.
Why has outsourcing gained traction in the Revenue Cycle Management (RCM) market?
The hospital revenue cycle process was not immune to the many changes COVID-19 brought to the US healthcare provider ecosystem, causing health systems to significantly shift operations to survive.
Challenges such as financial pressure, regulatory changes, the quality care and patient experience focus, and digital penetration pushed health systems – who traditionally prefer to keep operations in-house – to look outside for support. This drove more than 10% year-over-year growth in sourcing in the RCM market in 2021, and the strong contracting activity continues to gain traction this year.
Several health systems, including MarinHealth, Baptist Health, SSM Health, and Bassett Healthcare, have entered into outsourcing agreements with third-party vendors. However, unlike most past arrangements when sole-source was the dominant sourcing model, RFP-led sourcing is now the preferred model for healthcare providers in the post-pandemic world.
Exhibit 1: Split of new Revenue Cycle Management (RCM) services deals in 2021 – sole-sourced versus RFP-led
Source: Everest Group’s coverage of 32 major RCM services outsourcing providers
Why do healthcare providers prefer RFPs?
Key factors driving health systems towards a competitive route over sole-sourced are:
Unlike the pre-COVID era, when outsourcing was, typically, limited to a revenue cycle function or segment, the new deals coming in the Revenue Cycle Management (RCM) market are broad-based and many times encompass the end-to-end revenue cycle needs of healthcare providers. Given the size and scale of such deals, healthcare providers prefer the competitive route to get the best possible deal
While cost used to be the primary decision-making driver, health systems are now emphasizing deal aspects such as innovative pricing (wanting third-party providers to have skin in the game) and offering diversified delivery network, innovation pool commitment, and compatibility with existing infrastructure, including experience of working with platforms such as Epic
With hundreds of outsourcing providers in the RCM market, health systems know they can shop around to get the best deal
Key decision-making parameters for health systems in a competitive bid
Healthcare provider enterprises are looking for service providers who can provide end-to-end services covering the entire gamut of Revenue Cycle Management (RCM), rather than discrete, siloed services.
From a decision-making perspective, below are some of the key parameters that enterprises look for when selecting a potential service provider, along with their relative importance rated on a scale of 1 to 10:
Exhibit 2: Level of importance of key buyer decision-making parameters for outsourcing Revenue Cycle Management (2021)
Source: Everest Group’s coverage of major Revenue Cycle Management (RCM) providing enterprises
Service providers need to pay special attention to how they position themselves effectively in the extremely competitive RCM market. The two main levers determining a winning proposal are:
High-quality, well-structured proposals that demonstrate a deep understanding of the client’s needs
Commercial proposals that are well aligned with the client’s budget and offer flexible payment terms
As competitive RFPs rise in the RCM market, providers who can create a differentiated value proposition and align their strategies with the enterprise’s vision will succeed in securing these lucrative deals.
COVID-19 put the spotlight on Decentralized Clinical Trials (DCTs) that will last well beyond the pandemic-stricken years as the industry increasingly adopts digital solutions for conducting remote, virtualized, or decentralized trials. In this digital ecosystem, vendors need to focus on several strategic areas to provide a holistic DCT experience and stay ahead of the competition. Discover in this blog the five priorities that can help product vendors take the lead in the DCT ecosystem.
Decentralized clinical trials rose to popularity during the pandemic. As people around the world were advised to stay indoors, sponsors and Clinical Research Organizations (CROs) scrambled for an alternative solution. DCTs catapulted to the mainstream and disrupted the clinical trial landscape.
DCTs offer reduced dependency for on-site visits, increased patient convenience, and improved insights from real-time patient data. While the pandemic may slowly subside with increased vaccinations, decentralized trials are here to stay – continuously elevating the trial experience for patients, sponsors, and investigators.
With DCT adoption growing significantly, sponsors have varied sourcing criteria based on their priorities. We have observed that large biopharma companies prefer a unified platform while mid-and small-sized players are more interested in cost as their top sourcing criteria for DCT vendors.
Biopharma companies want vendors who feel the market pulse and offer tailor-made deal solutioning for increased DCT adoption, as illustrated below.
Sourcing criteria for selecting DCT vendors
Five focus areas for DCT vendors to enhance their value proposition
To increase DCT adoption and run trials holistically, sponsors and CROs require matured technology products as well as auxiliary services. Hence, DCT vendors should not only strengthen their product offerings but also up their game in delivering auxiliary services.
With the exponential rise in DCT adoption, new players are rapidly entering the DCT landscape. In this marketplace, how can vendors offer value and stay on top of the competition? Our analysis reveals the following five areas that can help DCT vendors elevate their offerings above others:
Inorganic growth – Considering the speed of digital disruption in the clinical trial landscape, inorganic growth is the fastest way to grow and expand capabilities. Technology-based DCT product vendors are focusing on improving their consultative positioning by combining high-tech and high-science under one platform. Two recent examples are THREAD acquiring Modus Outcomes, an organization that supports eCOA selections, designs patient-centric trials, and fosters scientific delivery of DCTs. Similarly, Clinical Ink acquired Digital Artefacts to enrich the data coming from patient-reported outcomes with situational awareness and active and passive digital assessments
Partnerships – DCT product vendors increasingly seek to partner with specialists to enhance the delivery of auxiliary services. These unions aim to increase trial efficacy and eliminate risks and delays while improving the experience for patients and site practitioners. Some recent deals include Science 37 collaborating with Foundation Medicine to accelerate the patient selection process for oncology trials. THREAD has entered alliances with Almac Clinical Technologies to reduce trial delays and risks and also with endpoint Clinical to simplify trial operations for site personnel
Human capital development – Investments in human capital are either focused on designing a simple unified platform for seamless patient experience during trials or on expansion and marketing operations. This has led product vendors to add new positions like Chief Growth Officer, Chief Design Officer, Chief Strategy and Expansion Officer, etc. Medable, Science 37, THREAD, Castor, and ObvioHealth have made significant investments in hiring or opening multiple roles directly or indirectly related to DCT solutions to expand their services and establish strategic partnerships
Funding – Multiple DCT vendors have raised significant funding to enhance their DCT program. Science 37 has recently become a public-listed company, thereby making enough funds available for DCT expansion and growth. On the same lines, Medable has secured a US$ 304 million Series D funding, taking the total company valuation to just over US$ 2 billion. It plans to use the funds to improve access to clinical trials worldwide and accelerate new drug development. ObvioHealth had raised US$ 31 million in its latest round of funding, while Castor raised US$ 45 million in its series B funding. While ObvioHealth plans to direct funding to enhance its proprietary IT capabilities and make new hires, especially keeping in mind the APAC region, Castor is focusing on accelerating trials and maximizing the impact of research data on patient lives. These activities clearly echo the positive investor sentiments towards DCT solutions
Geographic expansions – Enterprises are looking for studies that are global or beyond the North American (NA) region, pushing DCT vendors outside their established geographies into the Europe, Middle East, and Africa (EMEA) and Asia Pacific (APAC) markets. Both THREAD and Medable have established offices in Dublin, Ireland to expand their presence and grow the market for decentralized trials in the EMEA region. ObvioHealth has partnered with Anatara Lifesciences to launch DCTs in Australia, and Science 37 has partnered with CMIC Holdings to enable and advance its DCT offerings for Japan and the APAC region
The age of decentralized trials has begun, and sponsors are shifting away from the site-anchored approach to hybrid or completely decentralized trials. They are looking to convert their piecemeal deployments into a comprehensive strategy aimed at enhancing the trial experience for patients, sponsors, and CROs.
To cater to this rising demand, DCT product vendors need to leverage advancements in digital technology and enhance their value proposition. With a deep focus on inorganic growth, partnerships, human capital, funding, and geographic expansions, providers can offer a seamless DCT experience in 2022 and well into the future.
The biggest benefit of Decentralized Clinical Trials (DCT) is the opportunity to enhance the patient experience, but the process is rife with challenges that create disengagement. The problem is not that patients are unengaged, but rather the vendor products are not always very engaging. The solution lies in undertaking a patient-first approach. Discover the tenets of a patient-first design approach in this second blog in our continuing coverage of this timely topic.
The pandemic has propelled decentralized clinical trials (DCT) into the mainstream, and multiple enterprises have transitioned into the virtual model for conducting clinical trials. Both enterprises and DCT vendors have stated that improved patient experience is the biggest benefit of the decentralized model. What do enterprises mean when they talk about patient experience? Read our blog, How Decentralized Clinical Trials Put the Patient Experience at the Forefront, to find out.
To deliver a superior patient experience and derive maximum benefit from this model of conducting trials, enterprises and vendors must be aware of the patient-facing challenges that might pose major hindrances. A closer look at the top challenges will help businesses develop effective measures to improve patient engagement and retention.
Major patient-facing challenges
The entire remote model has reduced in-person interactions. Insufficient communication from sites and sponsors often leads to disengagement among patients. The human touch, an important psychological aspect in healthcare, goes missing in this model. Added to this is the burden of learning about new products and technologies.
Patients have very limited digital literacy and may find it extremely difficult to operate a new sensor, a smartphone, or an application. Vendors are struggling to develop robust training and support programs while enterprise buyers are more concerned about patient education capabilities and post-implementation support in their sourcing criteria.
All these factors create a general sense of discomfort and disengagement among patients, thereby defeating the principal benefit that vendors and enterprises expect from a DCT solution.
How can vendors overcome patient-facing challenges?
Designing a patient-centric solution is the best way to address these challenges. Having a deeper understanding of patients’ journeys and their pain points, while involving them in solution design will lead to greater compliance and engagement. The following exhibit highlights the various tenets of a patient-first solution.
Exhibit 1: Tenets of a patient-first design approach
Six aspects of a patient-first design approach
Empathetic: DCT solutions should portray a deep understanding of the needs, well-being, and interests of patients, fostering trust and emotional connection. Vendors need to map the entire trial journey and look at it more holistically rather than logistically. Incorporating patient feedback into designing solutions will reduce a lot of stress and burden on patients
Secured: Concerns with data security, compliance, and privacy have increased with the rise in DCT adoption. Patients fear the consequences of device and network hacking, data leaks, and unauthorized access to data. DCT vendors must incorporate stringent security and compliance measures, secure the networks, and prevent all types of unauthorized access. With precise security measures in place, patients will feel safer with their data and will be more willing to share data for clinical research
Adaptable: DCT solutions must be able to incorporate the changing patient context, needs, and preferences to build fluid experiences. The same solutions should be adaptable and scalable as per the study requirement, ensuring a consistent patient experience and providing long-term sustainability
Engaging: Delivering engaging content is the best way to keep patients motivated in this digital world. Interactive educational materials, timely communication of trial progress (lay summaries), and patient reports go a long way in increasing patient engagement and retention. Patients can be motivated by increasing their trial literacy, setting up patient advocacy boards, and rewarding them for their contributions to the trial
Personalized: A one-size-fits-all solution will not work as patient experience varies at each stage and with each individual. Individualized care and personalized solutions help in building trust, loyalty, and retention rates among patients. Giving patients the liberty to choose their treatment plans (wherever possible), creating patient-specific digital ads, and supporting patients via artificial intelligence (AI) assistants are some of the ways to incorporate personalization into clinical trials
Reciprocity: Patients, vendors, and enterprises should be encouraged to communicate and share relevant experiences. Beyond trial periods, vendors and enterprises can engage patients with information on lifestyle, new developments on drugs or medical devices, upcoming trials, diet plans, etc. This type of communication will increase the willingness among patients to share personal data with AI systems as well as the scope with vendors, leading to more customized solutions that promote relevant and progressive experiences
Patients do not want to be treated as mere statistics. They want the touch of empathy and personalization, pushing DCT vendors to think more ‘humanly’ and add ‘emotional’ content while designing DCT solutions.
When all the above elements are incorporated in building DCT solutions, it will not only increase participation and adherence but also improve the brand value and bottom line for DCT vendors.
Over and above the empathy-backed approach toward creating a patient-centric solution, DCT vendors and enterprise buyers can look further at certain initiatives aimed at improving patient experience.
A sheer lack of awareness among patients regarding ongoing or planned trials exists. Enterprise buyers and vendors should spread information about upcoming clinical trials and steps to participate in them while promoting the ease of using digital technologies (via social media, newsroom, public releases, etc.). Home-care nurses or physicians still must make monthly calls or visits to motivate patients and add some scope for face-to-face interactions between patients and healthcare professionals.
Though the pivot or the integral enabler for DCT solutions is technology and connected systems, the focus should be on improving the patient experience and building the future towards a patient-intuitive smart DCT solution suite.
The CMS Interoperability and Patient Access final rule has enabled key healthcare stakeholders – payers, providers, and health IT vendors – to realign their strategic goals and work toward enhancing member engagement and care delivery.
While interoperability in healthcare can deliver numerous benefits, complying with the rules can be complex and we are closely tracking this issue. In our earlier blog, we covered the evolution of interoperability over the years, the interoperability rule, and the challenges enterprises face in deciphering this regulation.
Read on for part two in our blog series that focuses on the data sets that need to be shared, steps involved in the data sourcing process, and the areas enterprises must focus on to navigate through the interoperability rule.
Which data gets shared as part of the interoperability rule, and what is the data sourcing process?
The interoperability rule has mandated payers to share across member- and plan-level information with the help of two Application Programming Interfaces (APIs) – patient access and provider directory. The rule also clearly identifies distinct data sets that need to be shared through both the APIs, as illustrated below.
Having discovered what data needs to be shared, the next big question for enterprises is understanding how to extract this data. To make the necessary data available to its members through open APIs, enterprises primarily have to perform these three key steps: source system identification, data mapping, and data transformation.
Source system identification: As healthcare organizations store member information across multiple systems such as claims management system, Electronic Health Records (EHRs), etc., the primary objective is to identify the right source systems that house the information needed to be shared through the APIs
Data mapping: Data elements mandated by CMS are populated across various Fast Healthcare Interoperability Resources (FHIR) profiles such as patient profile, practitioner profile, etc. These data elements must be mapped against the respective source systems by matching the fields from the source database to the target database
Data transformation: FHIR profiles consist of data elements with attributes such as cardinality, data type, and binding value sets. The mapped data will have to be transformed into the FHIR recommended format by adhering to the data attributes (for example, translation of system codes into industry-specific codes, usage of industry- standard unique identifiers such as National Provider Identifier (NPI), Clinical Laboratory Improvement Amendments (CLIA) number, etc.)
How do enterprises navigate through the CMS interoperability rule?
Although the interoperability rule defines IT investments payers, providers, and Health Information Technology (HIT) vendors must make, enterprises also need to plan for other critical aspects such as infrastructure scalability and data security in parallel. These areas will be crucial given the increasing data volume and demand for more streamlined services around data access and utilization.
The exhibit below illustrates the key IT remodeling themes and corresponding transformation levers for interoperability implementation in a healthcare enterprise.
FHIR-based API ecosystem
The interoperability rule states that healthcare enterprises should establish API interfaces for all systems handling member/patient data and that the data transferred among healthcare entities – including the member/patient – should be in a standardized format. A robust API-led interoperability strategy can help healthcare enterprises curb the data liquidity issue within their ecosystems. The FHIR-based APIs will enable data format standardization between different endpoints, decrease development time, and save storage space on endpoint devices.
But just creating and establishing FHIR-based APIs will not suffice. Enterprises need to integrate and orchestrate formats other than FHIR. While connectivity with standard or off-the-shelf systems will be easier, homegrown/custom systems will be challenging to map to FHIR standards. In-house development teams and technology vendors will have to create workarounds to modify existing components that consider the potential variability in medical terminologies.
With the implementation of FHIR-based APIs, enterprises must assess scalability challenges within their existing infrastructures. To accommodate the upcoming member/patient data access requests and enable quick data retrieval, enterprises should start to manage their current data storage and compute capacities. Enterprises can approach the data scalability and infrastructure issue by either leveraging existing infrastructure to build an FHIR-based layer or partner with technology vendors to leverage their data, cloud, or FHIR platforms.
As healthcare enterprises will have access to multiple data sources, healthcare interoperability might open the door to security breaches and cybersecurity threats that may not have existed if the data resided within the enterprise. With the influx of data from other healthcare entities, current standard security checks might not be able to cross-reference and validate the identity of the entity requesting access, creating openings for data breaches. To manage these security challenges, added investment in particular focus areas (e.g., application penetration testing, consent management, member education) can help enterprises achieve sustainable data security.
The road ahead
While enterprises are complying with the CMS mandate, an increased focus must be put on how they can look beyond regulations to address some of the key pain points in the industry, such as patient experience, care management and outcomes, and total cost of care. With data flowing seamlessly across the healthcare ecosystem, enterprises should identify and invest in areas that would be crucial to creating long-term business value while also giving them a competitive edge.
As part of our third blog in this series, we will next cover how healthcare enterprises can approach the interoperability rule beyond the mandate to reap long-term benefits, key investment areas, value for enterprises, and an interoperability enablement framework that provides a view into the required IT components for regulatory compliance and what goes beyond regulation.
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